The Homa Files

Are movie theaters heading for the same junk heap?

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According to the WSJ …

Movie theaters are reeling from a very disappointing summer season.

The summer 2017 season has been defined by big-budget movies that failed to live up to their massive marketing campaigns.

A steady stream of lackluster major releases …  has depressed moviegoing in the U.S. and Canada, where admissions are down about 5% so far this year. Revenues are down 2.9%, with slightly higher ticket prices making up for some of the attendance drop.

Theater chain execs attribute the decline to the lackluster movie releases.

But, investors are starting to wonder if the industry is being fundamentally disrupted …

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Everybody knows that movie theaters are facing heavy competition from home theaters.

Why sit in the dark with an auditorium of strangers chomping on overpriced popcorn when you can conveniently sit around with family and friends eating and drinking whatever you please, more cheaply?

The answer, of course, is “presentation” and content.

Home theaters still can’t replicate an IMAX experience, and some movies (think: Star Wars) are way better with wide screens and industrial-blasting surround sound.

But, the typical comedy or love story doesn’t get much from a theater’s “production values”.

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So, it boils down to content, right?

Traditionally, theaters got exclusive rights to show movies for at least a couple of months.

But, that “window of exclusivity” is shrinking —  often done to weeks, sometimes down to days, and occasionally eliminated with  simultaneous multi-channel release to theaters, Netflix, Amazon, etc.

So, unless folks have a burning desire to see a movie on opening day (again, think: Star Wars) , they can wait a short while and stream it at home.

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And, the streamers now one-up the theaters with their own original content.

That content is exclusive to the streamers (i.e. not available in theaters) and is often delivered in an addictive serial format (i.e. as a linked series, not a single event).

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Finally, there are the fundamental consumer economics.

If it’s not part of a subscription, a streamed movie costs about the same as a single admission  … and that cost is amortized over all the friends and family sitting in front of the big screen TV.

Save on gas, save on food, spread the ticket price … that’s a pretty good deal.

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Years ago, Blockbuster was on fire.

Then, Netflix squashed them.

Now, looks like movie theaters are heading to the junk heap.

It’s called “creative destruction” … it’s part of business life (and death).

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This entry was posted on August 15, 2017 at 6:59 am and is filed under Disruptive Innovation, Media, Movies & Entertainment. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.